The African Development Bank (AfDB) says southern African countries, including Malawi, are set for an economic rebound in 2021 and 2022 subject to the Covid-19 pandemic tapering off.
In its latest Economic Outlook for Southern Africa, AfDB admits that the effects of Covid-19 have been uneven across countries in the region and that Malawi was the only southern African economy estimated to have expanded in 2020, with real gross domestic product (GDP) growth at 1.7 percent.
But the report titled ‘Debt Dynamics: The Path to Post-Covid Recovery’, shows that between 2011 and 2018, Malawi, Madagascar, Mozambique and Zambia exhibited the highest poverty rates in southern Africa measured using 2011 purchasing power parity.
Since the early 2000s, the report says the poverty headcount fell by about 58 percentage points in Namibia, 56 in Lesotho, 50 in Mauritius, 49 in Botswana, 46 in South Africa and 40 in eSwatini.
Marginal reductions in poverty occurred in Mozambique (20 percentage points) and Malawi (five percentage points).
Reads the report in part: “The combination of poor industry performance and a decline in the contribution of the services sector explain the region’s lacklustre performance in 2019.
“Agriculture’s contribution also declined marginally in 2019, but supported growth in 2020 thanks to favourable weather conditions.”
While every country in the region implements social protection programmes, the AfDB says different outcomes on poverty reflect differences in the scale of the programmes—both the population covered and size of support.
As part of solutions, AfDB urges governments to ensure that funds are used efficiently and for the projects for which they were intended.
The bank says more effective public financial management systems should be introduced and misappropriation of funds and wasteful spending should not be tolerated.
Reads the report: “Fast-tracking Covid-19 vaccination programmes may help countries ease tourism restrictions and boost visitors and increase tourism revenues.
“Encouraging foreign direct investment is also key to improving growth and foreign currency reserves.”
The Reserve Bank of Malawi has since urged commercial banks to
support the economy’s quick recovery by making resources available to productive sectors.
A report by the Ministry of Finance’s Debt and Aid Division shows that between June 2020 and June 2021, Malawi’s total public debt stock surged 34 percent from the K4.1 trillion to K5.5 trillion.
Experts have warned that Malawi is now on the precipice of a debt overhang, a debt burden so heavy that the country may not have the capacity to carry more loans.
Meanwhile, inflation rate is expected to close the year at 9.1 percent in 2021 from 8.6 percent, largely driven by increases in prices of fuel, fertiliser and food.